Trump Probably Did “Try to Cover Up” Bondi Donation.
Many readers may know that Donald Trump’s foundation in 2013 made a $25,000 to a political organization supporting Pam Bondi, the Florida Attorney General, at a time Bondi’s office was considering opening an investigation into practices at Trump University. The Clinton campaign is up with an ad stating that Trump “tried to cover up” this contribution. While I wasn’t standing in the room wearing a wire, I think they have a good argument.
Let’s back up a second. The tax code prohibits private foundations from making payments for the personal interests of the foundation’s donors, and it also prohibits expenditures in support of any political activity. The $25,000 payment probably violated both provisions, as thoroughly explored by Phil Hackney.
According to WaPo’s David Farenthold, in March of this year, after some press inquiries and a complaint from CREW, the Foundation admitted it had made an improper payment. Trump apparently repaid the $25,000 to his Foundation, and also paid a 10% penalty under the statute.
Where’s the cover-up? It’s between 2013 and 2016. On its tax return for 2013, the foundation did not disclose any spending for political purposes, and misreported the contribution to Bondi’s group (“And Justice for All”) as a contribution to another small charity named “Justice for All.” When the Tampa Bay Times asked Trump’s people about this in 2013 (based, it appears, on disclosures from Bondi’s organization), they had no comment, but Trump made some generally positive remarks on the record about Bondi.
For it to be true that the Foundation reported the name and address of a similarly-named firm instead of Bondi’s organization, the Foundation staff would have to be, literally, unbelievably incompetent. Any minimally competent foundation should not list the wrong name and address for a donee organization. Every charitable organization has a unique taxpayer identification number, sometimes also called an EIN (employer id number; it’s called that because it’s also used to identify the firm for payroll tax purposes).
Because invariably it does happen that organizations have confusingly similar names (or there may be a network of separate but related organizations), it is a standard practice to request the donee’s EIN and/or a copy of the letter provided by the IRS declaring them a charity before you cut them a check (see, for instance, page 5 of this 2006 advice from the association of small foundations). The donor firm then can use this number to search the IRS database to verify that the donee is a charitable organization. In addition to the IRS’s web site, this can also be done on several search cites, such as Guidestar. I give my students an assignment like this in my nonprofits class and tell them it should take less than 5 minutes.
For instance, a search for “Justice for All” (the phrase in common between Bondi’s organization and the one the Foundation reported) in the IRS’ “select check” page returns 11 results. Surely it would occur to any book-keeper, at this point, to ask which one. According to Farenthold’s story, the Foundation claims that it looked in “the book” that lists eligible charities. Probably that refers to what used to be Publication 78, the listing of eligible charities. But select check had replaced Pub 78 by 2011.
These steps are not only best practices, but are also probably required by law. The statute and implementing regulations require foundations to exercise due diligence in verifying that donees are eligible recipients for the foundation’s money. Though the regulations do not explicitly state that foundations must do an EIN search, common sense dictates that that is the bare, bare minimum step that probably is necessary to verify accurately. Donors also must verify the EIN if they check up on a done using a third-party source like Guidestar. I would say, basically, that any idiot can do an EIN check, and most do. It strains credibility that a foundation with any significant experience in grantmaking would make a mistake like this, unless they are utterly incompetent. And the Trump Foundation had been making grants for many years, and employed outside accounting advisors.
That the Foundation failed to correct the improper payment until this year is also terrible foundation management, but perhaps only very nearly unbelievably incompetent. The Tax Code imposes two sets of penalties on foundations that make prohibited political contributions: there’s a 10% penalty, and then there’s an additional 200% penalty if the expenditure isn’t “corrected” within the taxable year. The organization’s staff pretty much had to know that they had made a gift to Bondi’s group in 2013, because the Times asked them about it, Bondi’s group (apparently) reported it, and Trump responded with comments about Bondi. To fail to correct the error then would be to risk an extra 190% penalty. Why wouldn’t you correct that error, unless you wanted to maintain plausible deniability about your intention to have given the money to Bondi (and/or conceal the evidence of the gift from federal regulators who might refer it to the Justice Department)?
Perhaps this is all just an instance of what Josh Marshall calls “Trump’s Razor,” i.e., in any Trumpian scenario, the dumbest possible explanation is the right one. Gross, gross incompetence. But these failures to observe even the most basic principles of foundation management, and the fact that those failures happened to help conceal evidence of a payment that was at least politically awkward (and potentially inculpatory), seems to me to make a pretty strong circumstantial case of intentional concealment.
